Minister wants to boost German economy with investment fund
Published: Wednesday, Oct 23rd 2024, 16:40
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Federal Economics Minister Robert Habeck wants to get the sluggish German economy moving again quickly with a state investment and infrastructure fund. "That would be the big booster for the economy if companies were to invest more now," said the Green politician in Berlin.
According to his ideas, companies should therefore have ten percent of all investments deducted from their taxes or - if the tax burden is low - be reimbursed by the state.
"We should promote investments with an unbureaucratic investment premium of ten percent - for all companies, especially craft businesses and small and medium-sized enterprises," wrote the Green politician in a "modernization agenda". The second pillar of the agenda is to modernize infrastructure such as energy and communication networks, transport routes and educational facilities.
Habeck had already proposed a special fund worth billions to relieve the burden on companies in February. Finance Minister Christian Lindner (FDP) rejected the proposal at the time.
Financing through new debt
Habeck's new paper also provides for a reduction in high electricity costs, which are repeatedly cited by companies as a disadvantage in terms of location. Private consumers should also benefit, for example by reducing the electricity tax for everyone to the minimum required by European law. According to the concept, grid fees should also be significantly reduced.
Habeck did not want to commit himself to the financial scope of such a fund. However, there are calculations by the Federation of German Industries (BDI) that envisage a "mid three-digit billion figure" for the coming years, he said in Berlin. "So we are talking about a large volume here, but one that will be spent over many years." It is about renewing the conditions in Germany as a business location. "The first question, I think, is not: Is it 200, 300 or 400 billion? But rather: Do we want to get started?"
This fund is to be financed through debt - a word Habeck did not use, however. "It has to be pre-financed, I don't see any other realistic political option," he said. "I think this fund idea is also a viable option for those who insist on strict compliance with the debt brake, at least I hope so, because it is a limited agreement." It is not about opening up the debt brake in principle. However, Habeck probably wants to relax it for his project. In his paper, he calls the debt brake "in its current form a brake on investment and growth".
Coalition partner FDP up in arms
The FDP, which sees itself as the guardian of the debt brake, was immediately up in arms. FDP Secretary General Bijan Djir-Sarai described the proposal as "short-sighted and not expedient". "Indiscriminately paying out subsidies and piling up hundreds of billions of euros in new debt to do so cannot sustainably strengthen our economy." What is needed are comprehensive reforms to improve the conditions for doing business and unleash private capital.
FDP Vice-Chairwoman and Federal Education Minister Bettina Stark-Watzinger told the German Press Agency: "It is not a convincing concept to extract money from the German economy through unprecedentedly high taxes and levies and then redistribute it via a state fund."
Criticism also from the opposition
The First Parliamentary Secretary of the CDU/CSU parliamentary group, Thorsten Frei, accused the Economics Minister in the "Rheinische Post" newspaper of wanting to continue down the path towards a state-run economy.
"With an almost unbelievable faith in the state and a willingness to intervene, he will not achieve economic recovery and growth, but above all more bureaucracy," said the CDU politician.
Predominantly approval from the business community
In contrast, positive reactions came from the business community. "Robert Habeck shows that he has understood where the problems in Germany lie," explained Michael Hüther, Director of the German Economic Institute. He had correctly identified the issues. "But the financing remains unclear."
The President of the Kiel Institute for the World Economy, Moritz Schularick, praised Habeck for bringing much-needed momentum to the debate on the necessary changes to the German economy. "The ambitious paper rightly focuses on strengthening the German economy on the supply side in order to increase growth and competitiveness."
In contrast, Marie-Christine Ostermann, President of the Association of Family Entrepreneurs, described the proposals as "another smokescreen". In order to help the economy, Habeck should initiate structural reforms. "In the short term, abolishing the solidarity tax would be an investment booster."
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